One of the fundamental contributors, arguably most important, of a country’s economic transition from poor to rich is economic development. Whatiseconomics.org defines economic development as the sustained, concerted actions of communities and policymakers that improve the standard of living and economic health of a specific locality. Economic development is the combined qualitative and quantitative changes a current economy goes through. Economic development is a formal policy instructing implementation of new technology, evolving from an agricultural centered economy to an industry centered one and improving the standard of living for the rich, poor and everyone in between. While Adam Smith was probably the original “development economist” with his Wealth of Nations describing basic growth and development of economies, it wasn’t until the 1960s when economists began studying issues and resolutions with poor African, Asian and South American economies.
Economic development is measure by countries Human Development Index (HDI). The official website of the United Nations Development Programme, defines Economic development as, “A summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions.”
The HDI is ranked between 0 and 1. The greater the number the more developed a country is said to be. As of 2013 Norway has an HDI value of .449 ranking at 1, while Niger holds a value of .337 and is ranked at 187. The top 5 countries: Norway, Australia, Switzerland, Netherlands, and The United States (U.S.). The U.S. held a value of .914 and ranked at 5 in 2013.
The main issue of promoting economic development in developing countries is government action. A huge problem in these areas is that there is either no government intervention or extremely corrupt government officials. Corrupt governments are self-explanatory. They waste money and resources on bettering their lives or their regime instead of dumping it back into the economy. Officials need to form policy that puts money back into the region to aid in its development. They need to provide capital to local farmers so they can produce more than enough to get by in order for their industry to prosper. They need to invest into infrastructure like roads to allow easier travel for trading and buildings for both the living of families and the operations of local firms. The poorest of poor countries need their governments to reform land rights. In Sub-Saharan Africa there is plenty of undocumented land that is either fought over, or not getting used. Officials need to set a plan to privatize land to owners so poor farmers can make money on their land and increase their income.
Economic development is assisted with interregional and national trade. When localities try to produce whatever they can to survive that’s all it becomes, a mean to survive. This uses more resources then it would take if a village or region or even a country as a whole trades with others. Trade allows these localities to produce or gather what they can do most efficiently and barter for what other localities can produce. This is called comparative advantage. Comparative advantage, defined on economicshelp.org, is “when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries.” Trade as been around for thousands of years, but without the help of government to create institutions and infrastructure to aide in the process, some regions will be left just surviving.
Microfinance also assists in the economic development of a country. Business News Daily defines microfinance as “an array of financial services, including loans, savings and insurance, available to poor entrepreneurs and small business owners who have no collateral and wouldn’t otherwise qualify for a standard bank loan.” The Grameen bank in Bangladesh is a fantastic example of successful implementation of microfinance. It started in the poorest villages of Bangladesh. The bank made small loans, with lower interest rates, to groups of families so they could invest into their homes, farms and human capital. They also taught the families’ household accounting. The bank relied on peer accountability to pay back the loans on time and come up with the variance if a family did not have the money.
References not cited within blog post
Platteau, Jean-Philppe. (1995) Reforming land rights in Sub-Saharan Africa: Issues of Efficiency and Equity. United Nations Research Institute for Social Development.
Retrieved from http://www.unrisd.org/80256B3C005BCCF9/httpNetITFramePDF?ReadForm&parentunid=04FB3BC5FC4D5D9B80256B67005B6757&parentdoctype=paper&netitpath=80256B3C005BCCF9/(httpAuxPages)/04FB3BC5FC4D5D9B80256B67005B6757/$file/dp60.pdf
Todaro, Michael and Stephen Smith. (2009) Economic Development Tenth Edition.
Boston, MA: Pearson Education, Inc.